The Tribune

IN THIS column yesterday, we reported conversations that we had over the weekend with various businessmen about their fears for the future of this country’s economy if VAT were introduced.

It was not that they were against a tax of some kind to raise money to meet the country’s growing expenses, and reduce the public debt, but they did not think that VAT was the answer for the Bahamas’ economy. Rather than encourage growth, they saw it as a retrograde step, that would discourage investment, and price this country out of its number one industry — tourism.

They also talked of the brain drain that threatened the future growth of a country at the crossroads. In yesterday’s article, we wrote: “The brain drain has also started. The young business person said that it was sad that so many Bahamians have lost confidence and have either started to leave the Bahamas, or are planning to leave.

“‘These are the people with the talent that is needed in this country,’ he remarked.”

The gentleman telephoned after the article was published to clarify his reference when he talked of the country’s critical brain drain.

It was not VAT that was driving them out, he said, but they were leaving because of deteriorating social conditions. “They no longer believe that the Bahamas is a desirable society in which to raise a young family. Escalating crime was the main driving factor,” he explained.

And so we have on one side Bahamians losing confidence in their country’s economic growth and on the other fleeing its out of control violence.

They also talked at length about fiscal restraint, of politicians not setting an example by trying to cut back public spending in areas where it should be trimmed even in the best of times.

One of the sticking points was travelling politicians with a retinue of hangers on in tow.

Even former Exuma MP George Smith – considered a PLP party elder – is critical of Foreign Affairs Minister Fred Mitchell’s frequent flying schedule. (See today’s front page). Mr Smith noted that Mr Mitchell travelled a lot – “probably a lot more than necessary”.

Last year, Mr Mitchell scoffed at such public criticism. He believes that the job of a foreign minister is to carry the flag abroad, seeking new friends for his country, and, hopefully encouraging investment. Of course, in these budget cutting times we also have Minister of Financial Affairs Ryan Pinder out and about ostensibly doing the same thing.

Noted Mr Smith: “Ryan is making the rounds, but I don’t know how much results you’ll see out of that.”

Last year in a public statement, Mr Mitchell declared that he fully intended to fill the foreign minister’s role. Giving advance warning to the public of his intentions, he said that it would take him out of the Bahamas for most of this year. He dismissed his critics as part of an “idle” and “silly” debate. “Stupidity in its purest form,” he scoffed.

On Thursday, he will be on the University of the West Indies campus in Trinidad giving a talk on “Saving Caricom.”

The cost of these overseas trips has been questioned, but all Mr Mitchell is prepared to say is that everything is “within budget”. Maybe he will one day tell us what his “budget” is so that we can make our own judgment as to whether it is within budget, or whether the budget — considering our present economic condition — is too generous.

There are so many areas where there can and should be cost cutting. Mr Christie should start with his own bloated cabinet. Even Mr Smith did some finger-pointing in this direction. Many Bahamians see these sinecure positions as election rewards for party supporters. There could be no criticism if they were being supported from the party’s coffers, but this is the public’s money over which liberties should not be taken.

And then there is the overstacked civil service. There were high-ranking PLPs who as far back as the Pindling era recognised that this tree needed a drastic trimming. But no one had the courage to lop off so many solid voters. The Bahamas has many outstanding civil servants, but the service would be more efficient if more had been hired for their abilities, rather than for their willingness to mark their X against the party’s name on election day.

Since last year’s visit to the Bahamas of Owen Arthur – three-term former prime minister of Barbados, who introduced VAT to his country in 1997 after a long period of preparation – the economic situation of Barbados has gone downhill. It is reported that the Barbados government’s wage bill — “the highest in the region”— rose to 10.3 per cent of GDP last year and the international reserves had fallen to US$468 million by the end of October.

Although Barbados’ current prime minister Freundel Stuart maintained that the position of his party was that civil service layoffs would be a “kind of last option when every other option failed”, Barbados is obviously facing failure. At the end of last year, Stuart’s economic affairs minister announced that his government would not only trim the public service, but would also “reduce by 10 per cent the salaries of ministers, government legislators, parliamentary secretaries and those considered to be a ‘political appointee’.”

On Friday, it was announced that the Barbados government had started to lay off the first batch of workers in the public service as it sought to reverse an ailing economy.

In his Freeport speech last year on the merits of VAT, Mr Arthur had warned: “Because of its very nature, the VAT tends to introduce a higher level of buoyancy to the tax system. The growth in revenues will tend to outstrip the growth of the GDP. There will be the appearance that the state is flush with cash, and that extraordinary expenditure claims on the Treasury can be made. Fiscal disorder can in consequence ensue, triggering in turn a need for adjustment to the VAT rate.”

Did Barbados fail to adhere to this warning? And what of the Bahamas?